YOU CAN’T CLAIM THE COSTS OF ADVERTISING FOR CLIENTS IN YOUR COST BUDGET: YOU REALLY CAN’T

February 7, 2021 · by · in Civil evidence, Costs, Costs budgeting

An interesting point arose in the judgment of Mr Justice Saini in  Weaver & Ors v British Airways Plc [2021] EWHC 217 (QB).  The costs of advertising for clients to join a Group Litigation Order are not recoverable, they were not allowed into the cost budget.

“… the advertising costs in issue are not recoverable and therefore they would fall out of the budget.”

THE CASE

A Group Litigation Order had been made in a case where claimants were pursuing the defendant for damages in respect of a data leak.  Only 5% of eligible claimants had joined the action (22,230).   The claimants’ solicitors claimed the past and future costs of advertising for clients as part of their costs budget.  This claim was disallowed by the judge.

THE JUDGMENT ON THIS ISSUE

    1. A further issue which arises in this CCMC concerns the claim for advertising costs in the claimants’ budget. In summary, in advertising these proceedings to seeker joiners, the claimants’ firm has incurred thus far a sum of £443,000 and intend to incur another £557,000 on future advertising. An issue accordingly arises in relation to the budget for the future costs.
    2. A threshold point has been argued before me in relation to the recoverability as a matter of principle of these costs, both the historically incurred costs and the intended costs to be incurred in the future.
    3. In paragraph 41 of the GLO there was provision made under the heading “Publication” for the lead solicitors to take reasonable steps to publicise the GLO in accordance with CPR Rule 19.11(3)(c) in the form attached to that order as schedule 3. Schedule 3, in summary, contained a form of advertisement for publication which described the terms of the GLO and referred to the data breach. It also provided the contact details of the lead solicitors.
    4. The costs which are the subject of the budget, as well as those which have been historically incurred, arise from very substantial media publicity of these proceedings. BA argues that, as a matter of law, these costs are not recoverable and relies principally upon the decision of the Court of Appeal in the case of Motto v Trafigura [2012] 1 WLR 657 (CA).
    5. BA argues, in summary, that the ratio of that case, and in particular what was said by Lord Neuberger MR at paragraph 110 of that decision precludes any claim for advertising costs. It is accepted, however, for the purposes of the argument before me, that the costs incurred pursuant to paragraph 41 of the GLO would in principle be recoverable.
    6. Turning then to the position of the claimants, reliance has been placed upon a number of cases including Ross v Owners of the Bowbelle (Review of Taxation under RSC Order 62 Rule 35) 2 Lloyd’s Reports 196 (Note), as well as the well-known case Re Gibson’s Settlement Trusts [1981] Ch 1789, per Megarry V-C at 185. It is said that under well-established principles, these advertising costs constitute work done “for use and service in the litigation”. These are said to be costs relevant to an issue in the claim and/or attributable to the paying party’s conduct. The claimants also rely upon the decision in Arif v Berkeley Burke [2017] EWHC 3108 (Comm) at paragraph 40.
    7. I have in addition been referred to the text to which I have already made reference, Class Actions, at paragraph 3-065.
    8. In my judgment, it is clear as a matter of binding authority that these are not recoverable costs. I quote from the Motto case:
“The expenses of getting business, whether advertising to the public as potential clients, making a presentation to a potential client, or discussing a possible instruction with a potential client, should not normally be treated as attributable to, and payable by, the ultimate client or clients. Rather, such expenses should generally be treated as part of a solicitor’s general overheads or expenses, which can be taken into account when assessing appropriate levels of charging, such as hourly rates.”
  1. BA are right to contend that what was being said here by Lord Neuberger MR was essentially a reflection of the well-known indemnity principle. In my judgment, the reasoning of Lord Neuberger MR applies directly to the facts before me. The costs which have been incurred and which are to be incurred by the claimant solicitors are, in my view, essentially general overheads, albeit that they are incurred in the context of a GLO. They are not the costs that are being incurred pursuant to the GLO, paragraph 41, to which I have already made reference, but are, rather, more accurately described as the costs incurred by the claimant solicitors of “getting the business in”. They are not for the account of BA, should BA be unsuccessful in the litigation. See also Friston on Costs (3rd Edition), para.65-100 which seems to me to reflect the correct position in law.
  2. As to the reliance placed by the claimants upon the decision in the Arif case, it does not seem to me that there was any argument before the judge in that case in relation to the specific matters argued before me. Specifically, the judge’s observations that are relied upon by the claimants in paragraph 40 of that judgment appear to have been a matter of common ground before him. I note also that the judge was not referred to the Motto case. For completeness, I should say that I do not draw assistance on the issue of principle from the Bowbelle case.
  3. So, for those reasons, the advertising costs in issue are not recoverable and therefore they would fall out of the budget.
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